Shanxi Coking (600740) Investment Value Analysis Report: The Evolution of Coke: From “Both Affections” to “Brow Breathing”
Shanxi Coking’s upgrading and transformation has entered the second half. From the perspective of the distribution of the industrial chain, there are coking coal on the coke and steel plants on the lower side, and both the upstream and downstream ends are squeezed.
Focusing on the common contradictions in the chemical industry, the company relied on the support of Shanxi Coking Coal Group, and embarked on a path of upgrading and transforming traditional coking enterprises.
After acquiring the coal production enterprise China Coal Huajin, the company has upstream coal resources and its profitability has increased significantly.
The company is currently in the second half of transformation, and the development of modern coal chemical industry is the core entrance for downstream breakthroughs.
The traditional coal chemical industry and coke profit cycle are not synchronized. The traditional coke business is located in the middle of the coking coal and iron and steel industries, which is essentially a processing business. Naturally, it is squeezed and the gross profit rate is reduced.
Under the recycling mode, coal chemical industry is the best way to increase the added value of the coke industry.
The company’s traditional coal chemical business uses coke by-products as its core raw material.
Although coke and coal chemical industry are in the same industry chain, due to the competitive landscape and different product price driving factors, there are differences in profitability cycles.
Based on the company’s production processes and products, we built the “crude oil-coal tar growth difference” indicator to reflect the profit cycle of the coal chemical sector.
Methanol to formaldehyde is the company’s transition to modern coal chemical industry. The 60-ton / year methanol derivative is the core project of the company’s comprehensive transformation of coal chemical industry. The planned production capacity and technical route are equivalent to the current China Shenhua coal chemical industry sector.
Methanol to carbide process uses coke oven gas and a small amount of coal as raw materials. The company has coal mine assets and excess by-product coke oven gas, which has a significant cost advantage.
With the continuous improvement of environmental protection, more and more coal chemical project approvals are becoming stricter. Coal chemical assets with coal resources and scale advantages are becoming scarce resources.
Profit forecast and investment grade: We expect the company’s net profit to be 15 in 2019-2021.
2 trillion, the corresponding EPS is 1.
The current corresponding PEs are 8/7/7.
Combining the absolute valuation method and the relative estimation method, we give the company 10 times PE in 2019, corresponding to a target price of 10.
Covered for the first time and given a “Buy” rating.
Risk reminder: the risk of falling coal prices; the serious decline in the profitability of downstream steel mills leads to the risk of coke reduction; there is uncertainty in the conversion of modern coal chemical industry; the construction period of coal-based revenue projects gradually decreases; there is a certain risk in project progress and fundraising.